Embedded finance – the idea of offering financial products where customers are already collecting through white label solutions and APIs – is not a completely new concept. In fact, in one form or another, such as Point of Sale Credit, the concept has existed for many years before Silicon Valley venture capital firm and media company (ha!) Andreessen Horowitz. Made it a thing. However, fueled by cloud technology and the plethora of new fintech and banking-as-a-service startups, there is no doubt that the embedded finance trend is accelerating.
The latest company to announce its hand is Berlin-based Banware, Which provides embedded finance in the form of loans to SMEs, in partnership with marketplaces, payment providers and others. It was launched in December and today it is revealing that it has raised € 4 million in seed funding.
The round leading force is Mass, and VR Ventures. They are joined by banking, payments and e-commerce by HTGF, and private investors.
Banxware says it will use the investment to grow and develop its embedded white label financial services offering, and expand its team. In addition to lending, the startup will also soon offer card-based products and other financial services.
The technology and infrastructure of Banxware enables any company to provide loans and other banking services to SME customers. The idea is to act as a link between banks (lenders), digital platforms and merchants. Banks have access to hard work to reach SME customers. Platforms, such as online marketplaces, can sell financial products beyond their original offerings. And traders benefit from early access to working capital.
Co-founder and CEO Jens Rohrborn explains, “SMEs have a harder time accessing capital when needed, especially when they are under three years old or do not have the oldest credit history.” “On top of this, loan applications, ie loan decisions and loan payments, still take several weeks in most cases.
“More and more vendors and merchants are using digital platforms through which they sell their products or process their digital payments. Using recent historical data on these merchants provided by the platforms, we can lend against their future revenue.
This has made Banxware an instant lending tool that includes AML and KYC compliance, and a scoring engine that analyzes historical platform data and data from third party providers, such as account information providers and external scoring services. Promise is a quick loan decision and loan payment, “all in less than 15 minutes”.
Rohrburn says, “On the lending side, we work with both balance sheet lenders and lending vehicles, with whom we agree on lending terms and loan decision criteria and on behalf of which we make loan decisions.” Huh. “Traders repay their debt in such a way that the platforms deduct a certain percentage of future merchant payments”.
Rohrborn says the company’s instant lending tool is “just the beginning” and that Banxware will develop additional embedded financial services and expand internationally.
Meanwhile, German Fintech currently generates revenue by charging a one-time fee for each loan that is processed through its platform and a one-off optimization fee.